Are cryptocurrencies really the future of money?

Fact: Crytocurrencies are now being adopted by major tech firms and even established banking groups.
(Reuters)

Cryptocurrencies, such as Bitcoin, Ethereum, Ripple, Lite and Dash, are taking the world by storm. Indeed, few things have generated such high interest during this fintech-driven era quite like cryptocurrencies.

That said, this form of money is not without its critics.

But as history has taught us, this is often the case with any new disruptive innovation. From the plastics to the Internet, from social media to electric cars, all were heavily disparaged before becoming mainstream.

And I’m confident that the same will happen with cryptocurrencies. Here are four keys ways that illustrate how they have moved into the mainstream over the past 12 months.

First, some of the world’s major tech companies are investing in and using cryptocurrencies. For instance, tech giant Microsoft allows customers to use Bitcoin – the world’s largest cryptocurrency – as payment for online games and apps. Bitcoin is also accepted by PayPal, amongst many others, as a form of payment.

Second, cryptocurrencies are beginning to be adopted by established banking groups. For example, the ground-breaking blockchain technology underpinning the majority of cryptocurrencies, is being used by major banks including Barclays and Santander. A foreign exchange service has recently been launched by Santander that uses blockchain technology developed by digital currency, Ripple to make same-day international money transfers. It is reportedly in talks with other major global banks and money transfer groups to develop similar products.

Meanwhile, banks such as Goldman Sachs have gone from almost dismissing crypto to recently setting up a cryptocurrency trading desk. BBVA, a multinational Spanish banking group with over ?21 billion in annual income, participated in one of the largest investments in the bitcoin industry.

Third, household-name investors are jumping on board the crypto train. Legendary billionaire investor George Soros, who was a previous crypto-sceptic, is now investing in digital currencies. He is certainly not the only Wall Street mogul to invest in cryptocurrencies, Alan Howard and the Rothschild family, amongst many others, are also following suit. Moreover, Gary Cohn, a former Goldman Sachs executive who led Donald Trump’sNational Economic Council said of cryptocurrencies: “The world will have a global cryptocurrency at some point.”

And fourth, regulation of the cryptocurrency sector is now becoming inevitable. This can be evidenced by the July deadline for suggested cryptocurrency regulation set at the G20 summit in Argentina in March.

This followed comments by Bank of England governor Mark Carney calling for further regulation within the sector. He said at the beginning of March: “The time has come to hold the crypto asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities. in my view, holding crypto asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.”

Indeed, an example of this is the proactive approach being taken by Japan, being one of the very first countries to adopt a regulatory framework to oversee trading on registered exchanges.

The interest in cryptocurrency is growing exponentially, and this, I believe, will only increase as the demand for digital currencies soars in an increasingly digitalised and globalised world. The digitalised world we live in needs digital currencies. As we adopt more and more tech into our lives, our financial affairs will be no exception. The world – individuals, families, businesses and organisations – are becoming ever-more globalised. This is something that won’t just stop or change. We are becoming more and more internationally-focused all the time.

However, in contrast, much of the resistance to digital currencies is founded on a profound misunderstanding.

This was shown in Warren Buffett’s recent comment: “I get into enough trouble with the things I think I know something about. Why in the world should I take a long or short position in something I don’t know about?”

I find it inexplicable that such a successful investor fails to see the intrinsic value of cryptocurrency. Therefore, it is absolutely crucial that traditionalists throughout the world of finance, like Buffett, set their sights further afield from the old centralised system of money and keep an open mind about cryptocurrencies.

As American businessman and former government official Edmund C. Moy stated: “Bitcoin, and the ideas behind it, will be a disrupter to the traditional notions of currency. In the end, currency will be better for it.”

The writer is founder and CEO of deVere Group. Views expressed are his own and do not reflect the newspaper’s policy.